banner books for news and views

The start of the 2020 lockdown had many commercial landlords and tenants thumbing through their commercial leases looking for relevant clauses as to rent relief.

Some discovered that their leases had a clause that provided for an abatement of a ‘”fair proportion” of their rent and outgoings in case they could not access the premises.  Typically, such a clause was included in a post 2011 ADLS lease and looked like this:

No Access in Emergency

27.5 If there is an emergency and the Tenant is unable to gain access to the premises to fully conduct the Tenant’s business from the premises because of reasons of safety of the public or property or the need to prevent reduce or overcome any hazard, harm or loss that may be associated with the emergency including:

(a) a prohibited or restricted access cordon applying to the premises; or

(b) prohibition on the use of the premises pending the completion of structural engineering or other reports and appropriate certifications required by any competent authority that the premises are fit for use; or

(c) restriction on occupation of the premises by any competent authority,

then a fair proportion of the rent or outgoings shall cease to be payable for the period commencing on the date when the Tenant became unable to gain access to the premises to fully conduct the Tenant’s business from the premises until the inability ceases.

The “no access” clause was introduced into standard ADLS lease documents in 2012 and was intended to provide for such circumstances as natural disasters.  If the premises couldn’t be accessed, the rent and outgoings could be reduced accordingly.

Most landlords and tenants with such a clause entered into negotiations as to what a “fair proportion” was.  Depending on the business and the nature of the premises, many landed on 50% of rent.  Some were at 25% and some were at 75%.  Some discounted the rent entirely.  Generally, outgoings were not discounted.

Subsequent litigation has not clarified the ‘fair proportion’ question to any great extent. 

For some tenants, no such clause was in place.  Many landlords abated the rent anyway as an act of generosity or just to keep their tenants solvent. 

Fast forward one and a half years and we are back in lockdown for Auckland and are facing the spectre of lockdowns in other parts of the country.  Tenants with the abatement clause in many cases are receiving discounts.  Tenants who don’t are often not.

The government has responded to this perceived unfairness by introducing a bill that will amend the Property Law Act 2007.  The amendment effectively inserts an abatement clause into commercial leases in very similar terms to the 2012 ADLS clause.

Proponents will say the move is fair and rebalances the costs of the lockdown in favour of the tenant.  Opponents will say the government has interfered in the right of two parties to contract freely.  The parties were free when signing the lease to negotiate how the risk of natural disasters was to be assigned and it was left at the feet of the tenant.  The government has reassigned that risk to the landlord without compensating the landlord. 

The abatement period only applies from the 28th of September 2021.  It does not apply retrospectively.  Tenants cannot claim rent abatements for past lockdowns but will for the current and future lockdowns from that date (provided the bill passes).

Affected landlords and tenants will have to agree on what constitutes a ‘fair proportion’.  If they can’t, the dispute will go to arbitration per the changes to the Act.  We expect most will agree and the parties will determine the ‘fair proportion’ along similar lines to last time.

If you are a landlord or a tenant and are unsure of your rights or how you are affected by the bill please get in touch with Scott Donaldson or the team at Mactodd Lawyers.

Related Articles
Or go back to overview
Commercial eSpeaking Winter 2022

2022 Budget

Read More
podcast remarkables2
Off the Record - Can your business handle divorce?

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have released episode 3 of their podcast, Off the Record.

Read More
podcast remarkables
Off the Record - A New Era for Directors' Duties

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have released episode two of their podcast, Off the Record.

Read More
etf investment guide theme wood
Rural eSpeaking Autumn 2022

He Waka Eke Noa

Read More
duncan article

Duncan Anderson, Associate, Mactodd Lawyers, Queenstown

Read More
Off the Record - Fair Pay Agreements

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have started a new video podcast where they address issues in law affecting Queenstown businesses.

Read More
Fineprint - Autumn 2022

Mental health in the workplace Co-ownership arrangements Checking your home is accurately insured Helping your family before you pass away Notifications of privacy breaches increase significantly Post script

Read More
2E064F28 C892 43AD 8F60 BC43E5BE2D68
Commercial eSpeaking Summer 2022


Read More
happy couple
Fineprint - Summer 2021

- Defining a de facto relationship

Read More
ricardo gomez angel z6CcN8rlftY unsplash2

Mann v Paterson Constructions Pty Ltd—Builders' Quantum Meruits Revisited' (2021) 37 Construction Law Journal 207 discusses recent changes to the law in Australia regarding restitutionary claims able to be made...

Read More
Looking at house plans
Fineprint - Winter 2021

Buying off the plans New edition of To Trust or Not to Trust Climate Action Toolbox Post-Covid working world An independent trustee Postscript

Read More
download 1 jpeg
Rural eSpeaking Autumn 2021

Rural Leases - Should be more specific

Read More
Rural eSpeaking - Summer 2020

Investment in Farming - A focus on syndicated farm investments The finite supply of water - Water easements Over the Fence - Crown Pastoral Land Reform Bill (submissions open), Synlait...

Read More
remote working
Commercial eSpeaking - Spring 2020

Read More
carbon footprint
Fineprint - Winter 2020

Read More
Wellbeing Budget 2020 Image 1080x675
Commercial eSpeaking - Winter 2020

The government’s Budget, presented by the Minister of Finance the Hon Grant Robertson on 14 May has addressed, in the words of the Minister, “a 1-in-100 year health and economic...

Read More
Covid 19

Read More
Home Buying, Selling & Moving Checklist

These helpful checklists will guide you thought some of the most important areas you and your lawyer need to address when purchasing or selling a residential property and also when moving.

Read More
on the move logo2
On The Move - A Practical Guide For Buying & Selling Your Home

Also includes comprehensive checklists to you don't miss out any important step as well as details on how to protect your assets and when you also need to consider a...

Read More
handing over keys
Australian Guide To Buying Property In NZ

Not all investments in NZ require consent from the Overseas Investment Office (“OIO”) but like many countries NZ has controls on overseas investment. Certain land is subject to OIO consent.

Read More
family trusts4
Family Trust Guide

This practical guide designed to steer you through the essentials of Family Trusts including: Is a family trust for you? Protection given by a Family Trust. Planning for your life. Duties of trustees and how to run a trust. Costs.

Read More
road to glenorchy small2
Guide To Buying Real Estate In New Zealand

Our local knowledge, experience and expertise will provide you with the support and advice you need for a successful property purchase, regardless of the size or complexity of the transaction.

Read More
chinese buyers
Chinese Buyers Guide To Buying Property in NZ

We have produced a practical guide on buying a home or an investment property in New Zealand in Mandarin.

Read More
wills estates2
Estates Booklet - The Closing Chapter

You’re catapulted into thinking about organising a funeral, whether it will be a cremation or burial and how to organise the day, and then you also need to think about...

Read More
Be the First to Know
Something for Nothing

Stay up to date with our latest News, Views & Resources by subscribing to our newsletter. We promise to provide you with quality content & the latest industry news.